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U.S. consumers tap wealth to keep spending freely
Published in Saudi Press Agency on 30 - 01 - 2006

U.S. consumer spending shot ahead a strong 0.9 percent in December as holiday shoppers, enjoying a respite from inflation, tapped savings and assets to make purchases, a government report showed on Monday according to Reuters.
The free-spending ways of the American consumer kept the saving rate -- normally the percentage of after-tax income socked away -- in negative territory for a seventh straight month. For all of 2005, the rate was a minus 0.5 percent, the lowest since the Great Depression.
December's negative saving rate came as the surprisingly big spending jump outstripped an as-expected 0.4 percent rise in personal income, the Commerce Department report showed.
The report, released a day before a Federal Reserve meeting on interest rates, showed inflation better contained than many forecasters had expected. Financial markets, however, largely shrugged off the data, which was incorporated in a report on fourth-quarter economic growth released on Friday.
The department's overall price gauge held steady in December and its core inflation gauge, which strips out food and energy costs, moved up just 0.1 percent. Wall Street analysts had expected the core measure to rise 0.2 percent.
While the department revised its October and November core inflation readings slightly upward, analysts welcomed December's moderation. Over the past 12 months, core prices have risen 1.9 percent -- just within the Fed's perceived comfort zone.
"That would support the idea that the Fed can stop raising rates soon," said Patrick Fearon, senior economist at A.G. Edwards and Sons in St. Louis.
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23 02 Local Time
20 02 GMT


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